Corporate Governance, Liquidity Risk, and Sustainable Growth Rate in the Nigerian Banking Industry




Board Independence, Corporate Governance, Liquidity Risk, Sustainable Growth Rate


Purpose: The objective of this study was to investigate the impact of board independence, liquidity risk management, and other bank-specific factors on the sustainable growth rate of banks in a developing country.   


Theoretical framework: The study relied on two major theories: the Agency Theory, which explored the conflicts of interest between owners and managers, and the Resources-based View Theory (RBV), which examined how banks utilised unique resources to achieve competitive advantages and sustain growth.


Design/methodology/approach: The study analysed panel data from twelve banks listed on the Nigerian Stock Exchange from 2008 to 2021. This study utilised the Feasible Generalised Least Squares (FGLS) regression technique, chosen for its effectiveness in addressing serial correlation and heteroskedasticity, to examine the effect of various factors on the sustainable growth rate.


Findings: The study found that the sustainable growth rate (SGR) of banks was significantly affected by the interaction between corporate governance variables and factors such as liquidity risk, dividend payout ratio, bank size, asset quality, and operating margin. Additionally, board independence and bank performance may not be enough to ensure a bank’s resilience in volatile conditions.


Research, Practical & Social implications: The study illuminated previously neglected factors that affect the sustainable growth rate of banks. Bank boards and policymakers can utilise these insights to enhance governance structures, risk management practices, and regulatory frameworks. This enhanced comprehension can contribute to a more stable financial system, improving public confidence and economic stability.


Originality/value: This study addresses a notable research gap by examining the influence of board independence and bank-specific factors on the sustainable growth rate of banks. Prior research has predominantly focused on the non-financial services industry, leaving this area understudied.


Download data is not yet available.


Adegboye, A., Ojeka, S., & Adegboye, K. (2020). Corporate governance structure, Bank externalities and sensitivity of non-performing loans in Nigeria. Cogent Economics & Finance, 8(1), 1816611.

Aebi, V., Sabato, G., & Schmid, M. (2012). Risk management, corporate governance, and bank performance in the financial crisis. Journal of Banking & Finance, 36(12), 3213–3226.

Alkhodary, D. (2023). Integrating sustainability into strategic management: a path towards long-term business success. International Journal of Professional Business Review, 8(4), e0162.

Al-Slehat, Z. A. F., & Altameemi, A. F. (2021). The relationship between non-interest revenue and sustainable growth rate: A case study of commercial banks in Jordan. The Journal of Asian Finance, Economics and Business, 8(5), 99–108.

Altahtamouni, F., Alfayhani, A., Qazaq, A., Alkhalifah, A., Masfer, H., Almutawa, R., & Alyousef, S. (2022). Sustainable growth rate and ROE analysis: An applied study on Saudi banks using the PRAT model. Economies,10(3), 70.

Angahar, P. A., & Mejabi, S. K. (2014). The impact of corporate governance variables on non-performing loans of Nigerian deposit money banks. Asian Economic and Financial Review, 4(11), 1531–1544.

Anginer, D., Demirguc-Kunt, A., Huizinga, H., & Ma, K. (2016). Corporate governance and bank capitalisation strategies. Journal of Financial Intermediation, 26, 1–27.

Armstrong, C. E., & Shimizu, K. (2007). A review of approaches to empirical research on the resource-based view of the firm. Journal of Management, 33(6), 959–986.

Armstrong, C. S., Core, J. E., & Guay, W. R. (2014). Do independent directors cause improvements in firm transparency? Journal of Financial Economics, 113(3), 383–403.

Arora, L., Kumar, S., & Verma, P. (2018). The anatomy of sustainable growth rate of Indian manufacturing firms. Global Business Review, 19(4), 1050–1071.

Ashta, A. (2008). Sustainable growth rates: refining a measure. Strategic Change, 17(5–6), 207–214.

Athanasoglou, P. P., Brissimis, S. N., & Delis, M. D. (2008). Bank-specific, industry-specific and macroeconomic determinants of bank profitability. Journal of International Financial Markets, Institutions and Money, 18(2), 121–136.

Beekes, W., Pope, P., & Young, S. (2004). The link between earnings timeliness, earnings conservatism and board composition: Evidence from the UK. Corporate Governance: An International Review, 12(1), 47–59.

Berg, A. G., & Ostry, J. D. (2017). Inequality and unsustainable growth: Two sides of the same coin? IMF Economic Review, 65, 792–815.

Bernile, G., Bhagwat, V., & Yonker, S. (2018). Board diversity, firm risk, and corporate policies. Journal of Financial Economics, 127(3), 588–612.

Bhagat, S., & Black, B. (1999). The uncertain relationship between board composition and firm performance. The Business Lawyer, 54(3), 921–963.

Bhagat, S., & Bolton, B. (2019). Corporate governance and firm performance: The sequel. Journal of Corporate Finance, 58, 142–168.

Burger, J. H., & Hamman, W. D. (1999). The relationship between the accounting sustainable growth rate and the cash flow sustainable growth rate. South African Journal of Business Management, 30(4), 101–109.

Central Bank of Nigeria (2021). Annual Statistical Bulletin.

Chen, H., Li, L., & Chen, Y. (2022). Sustainable growth research—A study on the telecom operators in China. Journal of Management Analytics, 9(1), 17–31.

Coles, J. L., Daniel, N. D., & Naveen, L. (2008). Boards: Does one size fit all? Journal of Financial Economics, 87(2), 329–356.

Das, A., & Ghosh, S. (2006). Financial deregulation and efficiency: An empirical analysis of Indian banks during the post-reform period. Review of Financial Economics, 15(3), 193–221.

Delis, M. D., & Papanikolaou, N. I. (2009). Determinants of bank efficiency: Evidence from a semi‐parametric methodology. Managerial Finance, 35(3), 260–275.

El Madbouly, D. (2022). Factors affecting the sustainable growth rate and its impact on firm value: Empirical evidence from the Egyptian Stock Exchange. Accounting and Auditing Journal of the Union of Arab Universities, 11(1), 1–40.

Ellul, A., & Yerramilli, V. (2013). Stronger risk controls, lower risk: Evidence from US bank holding companies. The Journal of Finance, 68(5), 1757–1803.

Escalante, C. L., Turvey, C. G., & Barry, P. J. (2009). Farm business decisions and the sustainable growth challenge paradigm. Agricultural Finance Review, 69(2), 228–247.

Fama, E. F., & Jensen, M. C. (1983). Agency problems and residual claims. The Journal of Law and Economics, 26(2), 327–349.

Fayad, A. A. S., Binti Mohd Ariff, A. H., & Ooi, S. C. (2022). Does board characteristics influence integrated reporting quality? Empirical evidence from an emerging market. Cogent Economics & Finance, 10(1), 2140907.

Fida, S., & Naveed, M. (2021). Novel insights into banking risk structure: Empirical evidence from nexus of financial, governance, and industrial landscape through nested tested modelling. Cogent Business & Management, 8(1), 1869362.

Fonseka, M. M., Ramos, C. G., & Tian, G. L. (2012). The most appropriate sustainable growth rate model for managers and researchers. Journal of Applied Business Research (JABR), 28(3), 481–500.

Genevieve, G., Frimpong, J. M., & Kwame, M. (2023). Moderating remittance and economic growth relationship with exchange rate: What new can we learn from Africa’s economy? Cogent Economics & Finance, 11(1), 2167577.

Grigorian, D. A., & Manole, V. (2006). Determinants of commercial bank performance in transition: An application of data envelopment analysis. Comparative Economic Studies, 48, 497–522.

Gupta, N., & Mahakud, J. (2020). Ownership, bank size, capitalisation and bank performance: Evidence from India. Cogent Economics & Finance, 8(1), 1808282.

Hartono, G. C., & Utami, S. R. (2016). The comparison of sustainable growth rate, firm’s performance and value among the firms in Sri Kehati index and IDX30 index in Indonesia Stock Exchange. International Journal of Advanced Research in Management and Social Sciences, 5(5), 68–81.

Higgins, R. C. (1977). How much growth can a firm afford? Financial Management, 6(3), 7–16.

Hoque, M. E., Akhter, T., & Yakob, N. A. (2018). Revisiting endogeneity among foreign direct investment, economic growth and stock market development: Moderating role of political instability. Cogent Economics & Finance, 6(1), 1492311.

Huy, D. T. N., Thach, N. N., Chuyen, B. M., Nhung, P. T. H., Tran, D. T., & Tran, T. A. (2021). Enhancing risk management culture for sustainable growth of Asia commercial bank-ACB in Vietnam under mixed effects of macro factors. Entrepreneurship and Sustainability Issues, 8(3), 291.

Imhanzenobe, J. O. (2020). Managers’ financial practices and financial sustainability of Nigerian manufacturing companies: Which ratios matter most? Cogent Economics & Finance, 8(1), 1724241.

Isnurhadi, I., Sulastri, S., Saftiana, Y, & Jie, F. (2023). Similarity of Banking industry sustainable growth rate under risk: Empirical study of the banking industry in ASEAN countries. Sustainability, 15(1), 564.

Jegers, M. (2003). The sustainable growth rate of non-profit organisations: The effect of efficiency, profitability and capital structure. Financial Accountability & Management, 19(4), 309–314.

Kalluru, S. R., & Bhat, S. K. (2009). Determinants of cost efficiency of commercial banks in India. IUP Journal of Bank Management, 8, 32–50.

Kessy, E. R., Mbembela, N., Amembah, M., & Taya, L. (2021). Assessment of assets quality and liquidity on sustainable growth rate of small and medium banks in Kilimanjaro, Tanzania. International Journal of Contemporary Applied Research, 8(8), 72–86.

Khan, A. (2022). Ownership structure, board characteristics and dividend policy: Evidence from Turkey. Corporate Governance: The International Journal of Business in Society, 22(2), 340–363.

Kyei, S. M., Polovina, N., & Kumah, S. P. (2022). The dynamic relationship between bank risk and corporate governance in Africa. Cogent Business & Management, 9(1), 2124597.

Levine, R. (2004). The corporate governance of banks: A concise discussion of concepts and evidence (Vol. 3404). World Bank Publications.

Levine, R., & Zervos, S. (1998). Stock markets, banks, and economic growth. American Economic Review, 88(3), 537–558.

Lockett, A., Thompson, S., & Morgenstern, U. (2009). The development of the resource‐based view of the firm: A critical appraisal. International Journal of Management Reviews, 11(1), 9–28.

Lockwood, L., & Prombutr, W. (2010). Sustainable growth and stock returns. Journal of Financial Research, 33(4), 519–538.

Lotto, J. (2018). The empirical analysis of the impact of bank capital regulations on operating efficiency. International Journal of Financial Studies, 6(2), 34.

Mamilla, R. (2019). A study on sustainable growth rate for firm survival. Strategic Change, 28(4), 273–277.

Mazorodze, B. T. (2021). Exchange rate misalignment, state fragility, and economic growth in sub-Saharan Africa. Cogent Economics & Finance, 9(1), 1898113.

Minton, B. A., Taillard, J., & Williamson, R. (2011). Do independence and financial expertise of the board matter for risk-taking and performance?

Mukherjee, T., & Sen, S. S. (2017). Sustainable growth: A study on some selected banks in India. Wealth: International Journal of Money, Banking & Finance, 6(1), 51–59.

Mukherjee, T., & Sen, S. S. (2018). Sustainable growth rate and its determinants: A study on some selected companies in India. Global Multidisciplinary, 10(1).

Mumu, S., Susanto, S., & Gainau, P. (2019). The sustainable growth rate and the firm performance: A case study of the issuer at Indonesia Stock Exchange. International Journal of Management IT and Engineering, 9(12).

Naceur, S. B., Ben-Khedhiri, H., & Casu, B. (2009). What drives the efficiency of selected MENA banks? A meta-frontier analysis. In Economic Research Forum Working Paper Series. Working Paper No. 499, pp. 1–20.

Nastiti, P. K. Y., Atahau, A. D. R., & Supramono, S. (2020). Does working capital management able to increase sustainable growth through asset utilisation? The European Journal of Applied Economics, 17(2).

Neifar, S., & Jarboui, A. (2018). Corporate governance and operational risk voluntary disclosure: Evidence from Islamic banks. Research in International Business and Finance, 46, 43–54.

Ngo, M., Le, T., Nguyen, N., Luu, T. (2023). Board independence and financial performance: empirical evidence on mediating role of market competition from the Vietnamese market. International Journal of Professional Business Review, 8(5), e01498.

Ojeka, S., Adegboye, A., & Dahunsi, O. (2021). Audit committee characteristics and non-performing loans in Nigerian deposits banks. European Journal of Accounting, Auditing and Finance Research, 9(4), 27–41.

Okere, W., Isiaka, M. A., & Ogunlowore, A. J. (2018). Risk management and financial performance of deposit money banks in Nigeria. European Journal of Business, Economics and Accountancy, 6(2).

Olson, G. T., & Pagano, M. S. (2005). A new application of sustainable growth: A multi‐dimensional framework for evaluating the long-run performance of bank mergers. Journal of Business Finance & Accounting, 32(9‐10), 1995–2036.

Pham, N. H., Hoang, T. M., & Pham, N. T. H. (2022). The impact of capital structure on bank profitability: evidence from Vietnam. Cogent Business & Management, 9(1), 2096263.

Platt, H. D., Platt, M. B., & Chen, G. (1995). Sustainable growth rate of firms in financial distress. Journal of Economics and Finance, 19(2), 147–151.

Pratama, A. A. P. (2019). Liquidity and asset quality on sustainable growth rate of banking sector. International Journal of Science and Research (IJSR).

Radasanu, A. C. (2015). Cash-flow sustainable growth rate models. Journal of Public Administration, Finance and Law, (07), 62–70.

Rahim, N. (2017). Sustainable growth rate and firm performance: A case study in Malaysia. International Journal of Management, Innovation & Entrepreneurial Research, 3(2), 48–60.

Raisch, S., & Von Krogh, G. (2007). Navigating a path to smart growth. MIT Sloan Management Review, 48(3), 65 .

Reddy, K., Mubeen, S., Raju, K., Jalaja, V., & Basha, M. (2023). Does the performance of banking sector promote economic growth? A time series analysis. International Journal of Professional Business Review, 8(6).

Reed, W. R., & Ye, H. (2011). Which panel data estimator should I use? Applied Economics, 43(8), 985–1000.

Sanusi L. (2011). Banking reform and its impact on the Nigerian economy. CBN Journal of Applied Statistics, 2(2), 115–122.

Shui-ying, J., & Ying-yu, W. (2008, December). The contribution of intellectual capital to firms’ sustainable growth ability: An empirical investigation based on listed companies in China. In 2008 International Conference on Information Management, Innovation Management and Industrial Engineering (Vol. 1, pp. 394–397). IEEE.

Soludo, C. C. (2006). Financial sector reforms and the real economy. Speech to the Council of Fellows of the Pharmaceutical Society of Nigeria.

Tecles, P. L., & Tabak, B. M. (2010). Determinants of bank efficiency: The case of Brazil. European Journal of Operational Research, 207(3), 1587–1598.

Uche, C. U. (1997). Banking developments in pre-independence Nigeria: A study in regulation, control, and politics [Doctoral Thesis]. London School of Economics.

Ul Ain, Q., Yuan, X., Mustansar Javaid, H., & Naeem, M. (2022). Board gender diversity and sustainable growth rate: Chinese evidence. Economic research-Ekonomska istraživanja, 35(1), 1364–1384.

Vasiliou, D., & Karkazis, J. (2002). The sustainable growth model in banking: An application to the national bank of Greece. Managerial Finance, 28(5), 20–26.

Velliscig, G., Floreani, J., & Polato, M. (2022). Capital and asset quality implications for bank resilience and performance in the light of NPLs’ regulation: a focus on the Texas ratio. Journal of Banking Regulation, 1-23

Vuković, B., Tica, T., & Jakšić, D. (2022). Sustainable growth rate analysis in eastern European companies. Sustainability, 14(17), 10731.

Yang, W., & Gan, S. (2019). Can asset quality promote the sustainable development of enterprises? In 3rd International Conference on Economic Development and Education Management (ICEDEM 2019) (pp. 48–53). Atlantis Press.

Zheng, M., & Escalante, C. L. (2020). Banks’ sustainable growth challenge under economic recessionary pressure. Agricultural Finance Review, 80(3), 437–451.

Additional Files



How to Cite

Agha, E. O. (2023). Corporate Governance, Liquidity Risk, and Sustainable Growth Rate in the Nigerian Banking Industry. International Journal of Professional Business Review, 8(10), e03506.